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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






2. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






3. Ed < 1






4. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






5. The sum of consumer surplus and producer surplus






6. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






7. Ed > 1 - meaning consumers are price sensitive






8. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






9. Occurs when LRAC is constant over a variety of plant sizes






10. The most desirable alternative given up as the result of a decision






11. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






12. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






13. The rational decision maker chooses an action if MB = MC






14. MUx / Px = MUy/Py or MUx/MUy = Px/Py






15. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






16. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






17. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






18. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






19. Ei = (%dQd good X)/(%d Income)






20. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






21. Es = (%dQs) / (%dPrice)






22. The lost net benefit to society caused by a movement away from the competitive market equilibrium






23. The difference between total revenue and total explicit and implicit costs






24. When firms focus their resources on production of goods for which they have comparative advantage






25. ATC = TC/Q = AFC + AVC






26. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






27. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






28. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






29. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






30. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






31. A good for which higher income decreases demand






32. Models where firms agree to mutually improve their situation






33. The price of a good measured in units of currency






34. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






35. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






36. Entry of new firms shifts the cost curves for all firms downward






37. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






38. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






39. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






40. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






41. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






42. The total quantity - or total output of a good produced at each quantity of labor employed






43. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






44. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






45. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






46. The change in quantity demanded resulting from a change in the price of one good relative to other goods






47. AVC = TVC/Q






48. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






49. The additional cost incurred from the consumption of the next unit of a good or a service






50. Product demand - productivity - prices of other resources - and complementary resources